Why Japan won\’t put a floor under the dollar

Osamu Takashima and Issei Suzuki at CitiFX explore the idea that Japan might move to put a floor under the dollar after this weekend\’s G20 meeting in a move similar to one adopted by the Swiss National Bank earlier this year to halt the Swiss franc\’s gains against the euro.

They find the idea unlikely.

\”First and foremost, a notable difference between Switzerland and Japan is that while SNB takes responsibility not only on monetary policy but also on FX policy, the MoF and BoJ take responsibility separately. The situation in Japan makes them far more difficult to conduct an integrated policy in FX and monetary policy area. \”

\”Second, roughly 70% of export and import of Switzerland are with Eurozone. This suggests that it’s quite reasonable for Switzerland to have currency target in EURCHF. At the same time, in recent years Japan’s largest trading partner is Asian countries including China. The share of US is only 15% in the total export and 10% in the total import. \”

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